This could be a dumb question, but is there anything stopping a large startup like Uber from being more generous with the cut its drivers get? How is it more feasible for a small company to do this?
That's not an enormous margin, but it's large. Uber is still expanding rapidly in driver count, in geographic range, and in product range. That takes quite a bit of money, especially the geographic range - Uber runs pretty vigorous ad and lobbying campaigns to influence regulators and oppose taxi agencies.
Fasten is a startup whose entire business model is "Uber but better for drivers". They advertise to consumers that they take a smaller cut, and hope to attract more drivers with their better rates. My guess is that Uber will crush or acquire them after dropping prices (or raising driver share) in the relevant markets.
So I think the answer is: Uber could do this, but it would slow their growth. Once they're an entrenched player in most markets, I would expect to see driver share (and possibly rates) rise a bit to maintain supply, but right now they're funneling everything they can into expansion.
(And, I'm sure, panting at the thought of using self-driving cars to turn that 80% into profit.)
FICA alone for a self employed person is 15% (although it's a bit lower in effect b/c of deductions). Add in state and federal income tax, fuel, maintenance, and vehicle depreciation, and you're talking way more than 20%.
They reported 10% on tax and 10% on fuel/maintenance. If you live somewhere with cheap gas, and don't count depreciation, then that 10% is plausible (obviously depreciation matters, but I think they didn't count it).
The 10% on tax is odd. Possibly it's about the self-employment premium (i.e. "How much of my earnings do I lose for driving Uber instead of working McDonalds?") Or possibly it's after EITC and other balancing factors - if Uber driving is your only career you aren't likely to be in a high tax bracket.
The other possibility that I didn't think of is that it's 10% of their total paycheck because they spend half of their paycheck on deductible expenses, but that doesn't mesh with the 10% expenses section.
I think the most likely explanation is that the drivers you're talking about are underestimating taxes due. They have to pay themselves since there's no withholding, and it usually takes years before underpaying taxes catches up with you.
And yeah vehicle depreciation is a big expense. It's probably more than 1/3 of total pay if a driver is actually making a small enough income to have a 10% tax rate.
I've heard many Uber drivers who say they are making almost nothing after expenses including vehicle depreciation.
It's worth remembering that a lot of Uber drivers are making relatively little money. Some are students, some are part-timers, but no matter what Uber ROI drops off more aggressively than most jobs (you work surge times, then constant-demand times, then your rates collapse).
I definitely have the sense that Uber's current model isn't sustainable - the money looks good because they constantly bring on new drivers who underestimate tax and depreciation, and count their salary in weekly-paycheck terms. I suspect that either they'll become more generous once they're spending less on regulation/campaigning, or something else will fall apart.
But that does not make the basis for a sound self-driving fleet.
$1 - 20 cents for Uber - 15 cents for taxes - 50 cents for fuel/depreciation = 14 cents.
18 cents - 4 cents for Uber - 3 cents for taxes = 11 cents.
So drivers net 14 cents/mile plus 11 cents/minute.
So does that mean that the drivers gross 80%? The photographers in the article would also be responsible for their equipment, materials, and taxes, so is this the right comparison?
So yes, Uber drivers are similarly on the hook for tax, expenses, and capital depreciation.
Passing 80% of the gross receipts (less the $1/ride safe-whatever charge, which I believe is for some sort of insurance policy?) does not seem like they are screwing the drivers to me. It seems like a pretty common split between marketplace/infrastructure providers and suppliers.
Edit: Reviewed parent, and they say Uber takes 20% of the $0.18/min and the $1/mi base rate. That's even worse. So drivers only make $0.14/min, or $8.64/hr if driving every minute. Yikes.
What really surprises me is that people simultaneously claim Uber cannot possibly be profitable while lambasting it for taking too much of a cut.
Which one is it? Either they're being greedy with excessive margins or dangerously dependent on venture capital to sustain an unprofitable business model.
I think that there's two perspectives here. One, Uber is a match-making service, and charging 20% to make an automated match on a server... That could seem excessive.
However, once you tack on things like boarding, marketing, development, legal fees, etc., it's possible that 20% isn't enough.
How? How can their margin be too high and simultaneously not enough to be profitable?
The only other alternative is that you think consumers should pay higher prices.
You present two perspectives, but only one can be correct: either it takes 20% to support the service, or it doesn't.
I don't think anything in this particular matter. I don't use Uber and I don't work for Uber, so I don't really have a dog in this race. However, I don't see how Uber not charging enough isn't a valid viewpoint.
[0] http://www.nytimes.com/2016/05/04/world/europe/food-theft-in...